The Silly Politics of Mediscare

The Silly Politics of Mediscare
August 13, 2012

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)

Consumer Power Report #339

With the selection of House Budget Chairman Paul Ryan (R-WI) as Mitt Romney’s running mate in the coming election, the issue of Medicare reform is likely to be the subject of loud demagoguery from now until November. This is nothing new; it’s already been going on for some time, in fact. But it’s likely to become much more public.

The primary Romney-Ryan response to so-called “Mediscare” talk is to say Obama cut $700 billion from the program himself, and Obama spokesperson Stephanie Cutter helped things along this weekend.

A glimpse of the Mitt Romney campaign’s pushback against President Obama’s Mediscare plans surfaced Sunday morning on Face the Nation. And Obama’s spokeswoman, Stephanie Cutter, did all the talking Republicans needed. At issue is the fact that, while Romney running-mate Paul Ryan wants to transform and cut future Medicare expenditures by about $700 billion, President Obama’s healthcare plan cuts $700 billion over a decade. Cutter might have stumbled when asked about it on Face the Nation. “You know I heard Mitt Romney deride the $700 billion cuts in Medicare that the president achieved through health care reform,” she said, noting the “savings” in ObamaCare. Two words are key here: “cuts” and “achieved.”

The attack on the $716 billion cut is a bit disingenuous, but it also serves the administration right for attempting to get away with double-counting these Medicare “savings” for dual purposes.

The more interesting policy issue is how Senator Ron Wyden (D-OR) has reacted to being pulled into the fray thanks to his collaboration with Ryan on their premium support plan, released last year, which would retain Medicare as a “public option” in an Obamacare-like exchange. Sure enough, as we anticipated at the time, Wyden is now being used as a sign of this idea’s bipartisanship.

“This man said I’m going to find Democrats to work with. He found a Democrat to co-lead a piece of legislation,” Romney said of Ryan at a campaign stop in Ashland, Va. He took it a step further at a campaign rally in Manassas, where he explicitly called out Ryan and Wyden’s Medicare collaboration. “The president’s put out a plan on Medicare. He would cut spending $700 billion,” Romney said before a crowd of approximately 8,000 supporters. “Paul Ryan and Senator Wyden said, ‘No, we need to restore, retain and protect Medicare.’ That’s what our party will do.”

But according to Wyden, Romney’s telling of events is misleading and inaccurate. “Governor Romney is talking nonsense,” Wyden said in an emailed statement Saturday night. “Bipartisanship requires that you not make up the facts. I did not ‘co-lead a piece of legislation.’ I wrote a policy paper on options for Medicare.”

The permanently exasperated Wyden has a point, but the senator is downplaying the importance of his endorsement of Ryan’s brand of premium support, which caused more than a little anger among the Left, despite the fact that the main takeaway from the perspective of Medicare recipients was the matter of addressing (oddly enough) Newt Gingrich’s criticism that the shift should be optional, not mandatory.

Yet what would Romney-Ryan actually offer in terms of Medicare reform should they take the White House? Ezra Klein provides what I view as a fairly balanced look at both sides, and while I disagree with his views on the merits of competition, the point that he concedes is that the White House’s method of achieving savings is no more proven:

These plans get at the basic disagreement between Democrats and Republicans on Medicare. Democrats believe the best way to reform Medicare is to leave the program intact but vastly strengthen its ability to pay for quality. Republicans believe the best way to reform Medicare is to fracture the system between private plans and traditional Medicare and let competition do its work.

It’s worth saying there’s no particularly good evidence for either option. Competition hasn’t worked very well in the health-care system. Indeed, Medicare currently includes private options through the Medicare Advantage program. The idea was these private, managed-care alternatives would be cheaper than traditional Medicare. As it turned out, they ended up costing about 20 percent more.

As for the pay-for-quality revolution that the Obama administration envisions, that hasn’t been proven at Medicare’s scale, either. Both Ryan and Obama – but not Romney – have proposed to back up their promises with an enforceable cap on the program’s future growth. Whether future Congresses would actually enforce such caps is, of course, an open question.

Trusting future Congresses is always dangerous, and it’s one reason why Ryan-Wyden – now being painted as extreme – may in fact be far too mild an answer.

-- Benjamin Domenech


IN THIS ISSUE:


MORE PROBLEMS WITH OBAMACARE’S AMBIGUOUS DEFINITION OF “AFFORDABLE”

Under IRS rules, “some working-class families would be unable to afford family coverage offered by their employers, and yet they would not qualify for subsidies provided by the law.”

The fight revolves around how to define “affordable” under provisions of the law that are ambiguous. The definition could have huge practical consequences, affecting who gets help from the government in buying health insurance.

Under the law, most Americans will be required to have health insurance starting in 2014. Low- and middle-income people can get tax credits and other subsidies to help pay their premiums, unless they have access to affordable coverage from an employer.

The law specifies that employer-sponsored insurance is not affordable if a worker’s share of the premium is more than 9.5 percent of the worker’s household income. The I.R.S. says this calculation should be based solely on the cost of individual coverage for the employee, what the worker would pay for “self-only coverage.”

Critics say the administration should also take account of the costs of covering a spouse and children because family coverage typically costs much more.

In 2011, according to an annual survey by the Kaiser Family Foundation, premiums for employer-sponsored health insurance averaged $5,430 a year for single coverage and $15,070 for family coverage. The employee’s share of the premium averaged $920 for individual coverage and more than four times as much, $4,130, for family coverage.

Under the I.R.S. proposal, such costs would be deemed affordable for a family making $35,000 a year, even though the family would have to spend 12 percent of its income for full coverage under the employer’s plan.

The debate over the meaning of affordable pits the Obama administration against its usual allies. Many people who support the new law said the proposed rules could leave millions of people in the lower middle class uninsured and frustrate the intent of Congress, which was to expand coverage.

SOURCE: New York Times


THE MEDICAID BATTLE, REINVIGORATED

Avik Roy unpacks the latest New England Journal of Medicine study:

The Harvard authors are clearly aware that their work has policy implications, and welcome its use to advance the expansion of Medicaid. So, let’s examine how well their analysis backs that up.

The authors looked at three states that expanded their Medicaid programs to childless adults – Maine, Arizona, and New York – and compared them to four neighboring states that did not – New Hampshire, Nevada and New Mexico, and Pennsylvania – over the years 1997 to 2007.

The authors found that Maine’s mortality rate increased relative to New Hampshire’s (by 13.4 deaths per 100,000); Arizona’s decreased relative to Nevada and New Mexico (by 10.2/100,000); and New York’s mortality rate declined relative to Pennsylvania (by 22.2/100,000).

In other words, the authors found that Medicaid was associated with an increase in mortality in Maine, but a decrease in mortality in Arizona and New York. Indeed, according to the authors, “single-state analyses showed [statistically] significant effects only in the largest state, New York.” Based on these three conflicting results, we are supposed to declare the debate over, and definitively conclude that Medicaid improves health outcomes?

Also, it must be noted that no two states are alike. In particular, New York – the state that appeared to show the largest benefit from expanding Medicaid – was compared to Pennsylvania, a neighboring state with a substantially different population and health-care system. Pennsylvania’s poverty rate of 11.5 percent is meaningfully lower than New York’s 14.1 percent.

Most notably, New York has a much larger immigrant population. In 2000, 38 percent of New Yorkers were from ethnic or racial minorities, compared to only 16 percent of Pennsylvanians. Hispanics and Asians comprised 21 percent of the New York population, compared to 5 percent of Pennsylvanians. This last bit is especially relevant, because recent immigrants and non-citizens are far more likely to be uninsured than U.S. citizens of any race. According to the U.S. Census, 45 percent of non-citizens are uninsured, compared to 20 percent of foreign-born naturalized citizens, and 14 percent of native-born residents.

Why are immigrants far more likely to be uninsured than native-born Americans, to a degree far greater than would be expected by differences in income? It may be that first-generation immigrants are less accustomed to Western, insurance-based health care systems.

Indeed, the Harvard authors found a profound difference between Medicaid’s performance in white and non-white populations. Based on their methodology, Medicaid improved mortality in the white population by 14 deaths per 100,000, compared to 41 per 100,000 in the non-white population.

In other words, if the authors had been able to find a more comparable state to New York, they might not have seen a significant improvement in mortality in New York relative to the comparator. And if that had been true, the study may have shown no significant effect of Medicaid on mortality rates.

But there was no suitable comparator to New York. Connecticut, New Jersey, and Vermont all had poverty rates in the 8 to 9 percent range, far lower than New York’s 14 percent. New York’s neighbors all have smaller minority populations than New York does.

In other words, the comparison that drove the authors’ key statistical finding, New York, was the one with the least suitable comparator state, and the most confounding problems.

More on the Medicaid battle here.

SOURCE: Forbes


MEDICAID CAN’T WITHSTAND MORE PRESSURE

Arguing against the Medicaid expansion in New Mexico:

Carol Vliet was 53 years old when she discovered her cancer had returned and spread to her brain, liver, kidneys and throat. With her life on the line, she turned to her primary care physician, who had monitored her health for the past two years.

But shortly after consulting with her doctor, she was devastated to learn that his practice was no longer accepting Medicaid patients. She would have to go elsewhere for treatment.

Unfortunately, Carol’s predicament isn’t unique among those covered by Medicaid. Over the years, Medicaid patients have suffered from dropped coverage, denied care and poorer health outcomes – sometimes placing patients in worse situations than those encountered by the completely uninsured.

Ultimately, Medicaid is a broken program.

When politicians speak of Medicaid, it’s often in glowing terms. Sen. Jeff Bingaman recently said in a statement that Medicaid stands to “improve the quality of life for many New Mexicans” and, when part of Medicaid was reauthorized, New Mexico Rep. Martin Heinrich called it “the change the American public wants and the change our children deserve.”

But if these politicians had to live with Medicaid, they’d certainly get a reality-check. Being covered under Medicaid isn’t a picnic.

One of the primary difficulties with Medicaid coverage is that fewer health care providers are accepting Medicaid patients. The New England Journal of Medicine published a study last year that showed that two-thirds of children on Medicaid are denied appointments to deal with serious medical conditions (compared with 11 percent of privately insured children). Now nearly three in 10 physicians across the nation will not accept Medicaid patients.

Doctors aren’t refusing to take Medicaid patients out of cruelty. Many have admitted to feeling guilty over refusing these patients and have put off denying care for as long as possible. But, ultimately, accepting Medicaid has been costing health care providers just too much.

At Reform Medicaid, here’s the latest map showing which states are expanding.

SOURCE: ABQ Journal


COULD MICHIGAN SCALE BACK MEDICAID?

This sounds dubious to me. Gov. Rick Snyder is still deciding:

A Senate Fiscal Agency memo from June estimated it would cost $2 billion a year to cover an extra 400,000 people in Michigan. The SFA also estimated the state could save at least $200 million in general fund/general purpose dollars until the match requirement takes effect in 2017.

States could expand their program and later decide to cut back if the cost becomes too much, Cindy Mann, an official with the Centers for Medicare and Medicaid Services, said this week at the National Conference of State Legislatures.

That eliminates the “last obstacle” to expanding Medicaid, said Don Hazaert, director of Michigan Consumers for Healthcare, a coalition of health care and other advocacy organizations.

“There is no long-term fiscal risk to the state,” he said.

But it doesn’t alleviate Speaker Bolger’s concerns.

“The speaker is concerned about making a long-term expansion of a program when it appears there is only short-term funding available,” said spokesman Ari Adler.

Bolger hasn’t taken an official position on whether or not Michigan should expand Medicaid, but it’d be difficult to shrink the program after offering it to more residents, Adler said.

“That’s not as easy as it sounds,” he said.

SOURCE: Mlive.com


 

BLUE CROSS’S ALABAMA MONOPOLY

 

One insurer, 90 percent of the market – what could go wrong?

Blue Cross defended its surpluses, claiming they’re appropriate and in line with industry standards. “Blue Cross maintains an appropriate level of reserves to protect our customers,” spokeswoman Koko Mackin told the Birmingham News. She added that the additional money accounts for just 3.3 months of claims and average $600 per insured member.

And because Blue Cross can’t receive money from the state’s emergency reserve pool for struggling insurers, it must establish a financial cushion for itself. “The Alabama insurance guaranty funds do not cover Blue Cross and Blue Shield of Alabama,” Mackin said. “Blue Cross’ financial reserves, therefore, are the company’s only source of funds to ensure that our members’ current and future claims are honored.”

Meanwhile, Blue Cross is facing seven lawsuits filed this year, all claiming that it conspires with other Blues plans to prevent competition. The most recent lawsuit claims the company is driving up insurance costs and reducing provider payments, FierceHealthPayer previously reported.

Alabama’s health insurance market is the least competitive region in the country, with Blue Cross commanding 90 percent. “If there were true competition, they would not be able to compile such largesse, such enormous reserves,” said Joe Whatley, whose law firm Whatley Kallas Litigation & Healthcare Group filed the latest in the string of lawsuits. “In Alabama, there is no regulation of Blue Cross rates and no meaningful competition. It is a clear monopoly.”

SOURCE: Fierce Health Payer


MEDICARE TO PENALIZE MORE THAN 2,000 HOSPITALS FOR READMISSIONS

Some prominent hospitals among those hardest hit:

With nearly one in five Medicare patients returning to the hospital within a month of discharge, the government considers readmissions a prime symptom of an overly expensive and uncoordinated health system. Hospitals have had little financial incentive to ensure patients get the care they need once they leave, and in fact they benefit financially when patients don’t recover and return for more treatment.

Nearly 2 million Medicare beneficiaries are readmitted within 30 days of release each year, costing Medicare $17.5 billion in additional hospital bills. The national average readmission rate has remained steady at slightly above 19 percent for several years, even as many hospitals have worked harder to lower theirs.

The penalties, authorized by the 2010 health care law, are part of a multipronged effort by Medicare to use its financial muscle to force improvements in hospital quality. In a few months, hospitals also will be penalized or rewarded based on how well they adhere to basic standards of care and how patients rated their experiences. Overall, Medicare has decided to penalize around two-thirds of the hospitals whose readmission rates it evaluated, the records show.

The penalties will fall heaviest on hospitals in New Jersey, New York, the District of Columbia, Arkansas, Kentucky, Mississippi, Illinois and Massachusetts, a Kaiser Health News analysis of the records shows. Hospitals that treat the most low-income patients will be hit particularly hard.

A total of 278 hospitals nationally will lose the maximum amount allowed under the health care law: 1 percent of their base Medicare reimbursements. Several of those are top-ranked institutions, including Hackensack University Medical Center in New Jersey, North Shore University Hospital in Manhasset, N.Y. and Beth Israel Deaconess Medical Center in Boston, a teaching hospital of Harvard Medical School.

SOURCE: Kaiser Health News


WHAT IF SOCIAL SECURITY WERE RUN LIKE MEDICARE?

From our friend Greg Scandlen:

Now many people in Washington think the elderly – and everybody else, for that matter – are incompetent to make their own decisions. “The people” are like fatted calves ready to be slaughtered by greedy profiteers. Regular people are too poorly informed to make good decisions and they are easily manipulated by clever marketing. Plus, they suffer from “information asymmetry” and don’t know much about the things they would like to purchase.

Certainly that is the thinking in the Medicare program, but why should it stop with Medicare? Perhaps Social Security should be run the same way. Why should our government allow people to spend taxpayer money on things that are bad for them? Why should we let them overpay for essential goods and services?

And just imagine the wonderful opportunities that would open up for federal bureaucrats! Why, we could solve the unemployment problem by assigning every Social Security recipient a case manager to “help” them spend their money more intelligently!

Of course, first we would have to institute a program of third-party payment for Social Security benefits. Rather than just giving people money, we would pay directly the providers of food, housing, transportation, utilities, clothing and all the rest. We would have to develop participating contracts for these providers and audit them all to ensure they are not overcharging these vulnerable citizens.

Then we would need to educate recipients to make sure they are spending their allowance appropriately. For instance, where obesity and diabetes are such a problem, people should not be allowed to spend precious Social Security money on fatty foods. So our participating food providers will be strictly monitored to make sure they are not peddling bad things. They will also be responsible for counseling recipients on proper diet.

Now, of course we will have to drop the whole idea of fee-for-service payment because all these providers will want to sell as much stuff as they can. So, we will switch to a “bundled payment” system in which food providers will get a fixed amount of money for each recipient. If they can provide less food, they will get to keep more money. This will be good for people on Social Security, too, because eating too much food is bad for you. I expect there are studies showing that the ideal diet is rice cakes and green tea, so why should anyone need more than that?

This is gonna be GREAT! Utopia is just around the corner.

SOURCE: National Center for Policy Analysis

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)